As we all know that money management is a very major aspect of our finances from making a budget for where each money received on payday goes to setting long-term aim to picking an investment that will help you to reach those aims.
Money management is just not to say “no” to any buy but to develop a plan that will allow you to say “yes” to the thing that is most necessary to you.
money management refers to an act of handling one’s finances to avoid debt and liability risk. Individuals, businesses, and the government all need to manage their finances. Budgeting, saving, spending, investing, expense tracking, and tax appraisal are the main aspects of money management. (Corporate tax, income tax, and other taxes). Money management refers to the tactics and techniques used to guarantee that funds are dispersed, spent, and accounted for correctly. Money management is also referred to as portfolio or investment management, and it describes how managers handle pooled funds, mutual funds, and even retirement plans.
SECRET OF MONEY MANAGEMENT
Money management is the “elephant in the room” that most traders avoid discussing. Some traders find discussing risk and capital management tedious, unpleasant, or even emotionally distressing because they know they aren’t doing it correctly.
However, like with most things in life, discussing the “elephant in the room” is often the most effective way to improve your Forex trading. This entails being truthful to oneself and prioritizing the “hardest” or “boring” tasks first and as often as necessary. If you overlook these issues, they will most likely become major issues that you will be unable to control.
Keep risk consistent
The first “secret” I’m going to let you know about is to keep your risk consistent. If you want your capital to be doubled or tripled till then don’t increase your position size. Most people make the error of increasing their bets as soon as they start making money. It is a quick way to get wiped out.”
Profits can be withdrawn
One of the keys to good Forex money management is keeping your risk consistent or “fixed,” as we described before. Professional traders do not increase their risk dramatically after each winning trade…this is not a rational or realistic risk management strategy. Professional traders who make a living in the markets remove money from their accounts every month, and the majority of them maintain their accounts at around the same level each month. You wouldn’t keep increasing your risk amount over time if you were withdrawing gains every month.
Don’t be greedy: don’t constantly aspire for high goals.
Another money-management “secret” is that you must make profits. This may not appear to be a “secret” to you, but I consider it one because most traders do not take profits as often as they should…and many traders do not take profits at all. Why are you having such a hard time taking profits? It’s fairly easy; it’s difficult to make a profit when a trade is profitable since your instinct is to keep a profitable deal open. While it is crucial to “let your winners run,” you must be selective when you do so; you should not attempt to let every winning trader go.
The market fluctuates, and it rarely makes a significant directional move without reversing a significant portion of it. As a result, taking a strong 2 to 1 or 3 to 1 profit when the market offers it makes considerably more sense as a short-term swing trader… rather than waiting for the market to retrace against your position and go back to your entry point or beyond, at which point you’ll most likely leave emotionally because you’re pissed you lost all that huge profit.
Knowing when to let a profit run is essential
Now and then, the market is primed for a 10-bagger…. a home-run trade. While these transactions are uncommon, they do happen. However, you must avoid making the error that many traders do: looking for a “home run” on every trade. The market will usually only move inside a particular range each week and month. The EURUSD, for example, has an average weekly range of roughly 250 pips.
Invest as soon as possible, as often as possible, and as much as you can
Because we have a lot of historical data on how they perform, and you can adjust several crucial aspects to enhance your investment returns while limiting your risk, they’re the most dependable. I won’t go into too much detail here because I don’t want to bore you (if you want to dive deeper check out how to start investing and my investing strategy posts).
However, the fundamentals are straightforward, and the best investment techniques are straightforward as well. Invest in index funds with minimal fees and high diversification, such as VTSAX. Invest in the overall stock market rather than individual stocks. Keep doing what you’re doing.
Watch the video: 5 Money-Saving Tips
BENEFITS OF MONEY MANAGEMENT
- Get financial control
- Investigate your investment options.
- Keeping track of your finances
- It’s now feasible to retire early.
- Better credit management